> For the complete documentation index, see [llms.txt](https://docs.realfi.co/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.realfi.co/glass-box-approach/peg-stability.md).

# Peg stability

RealFi ensures the stability of its USDrf peg through a layered, mutually reinforcing defense architecture designed to withstand extreme market stress:

### The Peg Stability Module (PSM) and arbitrage <a href="#the-peg-stability-module-psm-and-arbitrage" id="the-peg-stability-module-psm-and-arbitrage"></a>

The PSM is RealFi’s framework for maintaining USDrf peg, active 24/7. The protocol maintains on-chain liquidity for USDrf and mechanisms that continuously rebalance it around $1.00. If the market price of USDrf deviates from $1.00 on a secondary decentralized exchange (DEX), arbitrageurs are financially incentivized to buy the discounted token and swap it back towards parity, naturally driving the price back up to the peg.

### The on-chain stability fund <a href="#the-on-chain-stability-fund" id="the-on-chain-stability-fund"></a>

Acting as a dedicated stress reserve, this fund is held separately from the protocol’s routine liquidity operations and is capitalized by a portion of portfolio income retained by the protocol. The protocol’s standing liquidity, market makers, and arbitrage incentives form the first line of defense and – if these cannot close a deviation – the Stability Fund can directly intervene by purchasing and burning USDrf from the open market until parity is restored and market confidence returns.

### Dual-path redemptions and liquid reserves <a href="#dual-path-redemptions-and-liquid-reserves" id="dual-path-redemptions-and-liquid-reserves"></a>

To prevent catastrophic liquidity drains or "bank runs," RealFi maintains 10–20% of its Total Value Locked (TVL) in highly liquid U.S. Treasuries and money market funds. Redemptions follow a dual-path system:

Market makers use the PSM for near-instant swaps to anchor the peg, while institutional redemptions follow a separate queued, governed settlement process. Both paths enforce limits designed to protect reserve liquidity from sudden, massive outflows.

### Behavioral incentives and circuit breakers <a href="#behavioral-incentives-and-circuit-breakers" id="behavioral-incentives-and-circuit-breakers"></a>

The protocol uses structural friction and incentives to encourage behaviors that support peg health. Mechanisms like staking returns, loyalty point multipliers (R-Points), and 7-day unstaking cooldown periods are utilized to discourage sudden mass exits.

In addition, automated circuit breakers will halt minting or slow redemptions if liquidity coverage approaches minimum thresholds.